Auction

The process that happens with each Google search to decide which ads will appear for that specific search and in which order those ads will show on the page.

Each time an AdWords ad is eligible to appear for a search, it goes through the ad auction. The auction determines whether or not the ad actually shows and in which ad position it will show on the page.

Here's how the auction works:

When someone searches, the AdWords system finds all ads whose keywords match that search.

From those ads, the system ignores any that aren't eligible, like ads that target a different country or are disapproved.

Of the remaining ads, only those with a sufficiently high Ad Rank may show. Ad Rank is a combination of your bid, ad quality, and the expected impact of extensions and other ad formats.

The most important thing to remember is that even if your competition bids higher than you, you can still win a higher position -- at a lower price -- with highly relevant keywords and ads.

Since the auction process is repeated for every search on Google, each auction can have potentially different results depending on the competition at that moment. Therefore it's normal for you to see some fluctuation in your ad's position on the page and in whether or not your ad shows at all.